5b)

Short run is a concept that within a time period in the future, which is at least one input is fixed
and the other inputs are variable. A fixed input is an input in which the quantity does not change
according to the level of output example land. A variable input is a factor of production which the
quantity changes according to the output example labour.

Short run include two types of cost, which are Total Fixed Cost (TFC) and Total Variable Cost
(TVC). Total Fixed Cost (TFC) is applicable only in short run. Total Fixed Cost (TFC) will remains
constant even when there is zero output. Example: interest paid on a bank loan. Total Variable
Cost (TVC) is the cost of input that change with output. Example: wage paid to workers.

The Law of Diminishing returns may also occurred in the firm which is operating in short run
period.